Gold has had a historic year, rising to never-before-seen heights and defying economic trends at the hands of central bank purchases and geopolitical tensions.

Some local businesses were impacted by gold’s ascent as one precious metal dealer saw its stock soar during a major gold price surge, and another saw a dramatic increase in revenue over the last couple of years.

Gold started off the year trading just above $2,000 per ounce, before beginning its climb at the end of February, making significant strides in the months of April, August and September before reaching an all-time closing high at the end of October at about $2,788.

Robert Haworth, a senior investment strategist at U.S. Bank, explained that in times of gold price hikes, precious metal companies immediately see the value of their reserves increase.

“As the Fed has taught us to say lately, long and variable lags is how price moves in the precious metals (industry) in terms of the benefits to companies,” Haworth said. “There’s kind of an immediate benefit, but the ultimate economic benefit through earnings takes a long time.”

El Segundo-based metals brokerage A-Mark Precious Metals Inc. saw some of this immediate benefit when its stock price dramatically rose during April’s gold price surge. Its stock largely maintained this initial 19.28% jump for a couple of months before taking a summer dip followed by an autumn rise, resulting in an all-time high close price of $46.92 on Sept. 13.

After the Nov. 6 release of its most recent earnings report, however, A-Mark’s stock has been on a decline and stands at $28.19 as of Dec. 12, just about where it began the year in January.

A-Mark Chief Financial Officer Kathleen Simpson-Taylor attributed slight increased revenue for the quarter ended Sept. 30 to higher average selling prices of gold and silver, though this was in part offset by a 20% decrease in gold sales.

In a November earnings call, Chief Executive Gregory Roberts contextualized gold’s price and how it pertains to A-Mark’s operations.

“When you go day after day after day and week after week after week of higher spot prices or world record spot prices… we’re just going to buy back more product, and that’s going to hurt our margins (and our premiums) a little bit,” Roberts said.

Calabasas-based privately held precious metals retailer Goldco, meanwhile, has seen significant revenue upturn, increasing 331.54% from an estimated $13 million in 2021 to over $56 million in 2023.

Impact of central bank buys

Ultimately, gold’s 2024 was paved by central bank purchases and geopolitical risk.

Before the election, Haworth said gold behaved antithetical to a number of fundamental factors this year that typically indicate price behavior. In spite of high interest rates and a stronger U.S. dollar, gold continued to rise.

After the election, the price of gold took a dip before rising back up and continuing on a relatively plateau-like path since the end of November.

Post-election, as the nation and countries around the world find themselves in limbo awaiting the impacts of President-elect Donald Trump’s administration, Haworth said gold has begun trading to the fundamental factors it previously ignored.

“You have some autocorrelation between inflation, the dollar and real interest rates that tends to explain kind of the short term, but really when we think about the bullish trend we’ve seen over the course of the year, that’s almost fully explained by global central bank demand,” Haworth said.

As the price of gold hit its all-time high in October, central banks also had their highest net purchase month of the year, according to the World Gold Council.

It’s not always clear when these large central bank purchases will happen, but they usually happen in unison and coincide with a few factors. One is response to times of crisis, said James Steel, chief precious metals analyst at HSBC.

During times of crisis, gold performs well, and central banks may want to simplify their portfolios by allocating more funds to gold, Steel said. Additionally, he points to global trade tensions as a motivator for central bank buying as well as a factor increasing the price of gold. With Trump’s proposed trade tariffs, gold’s price could be impacted.

A huge driver for gold not only this year but the last couple of years, Steel said, is the “absolute elevation of geopolitical risk,” adding that he is confident the price of gold would not have risen above $2,000 at all if geopolitical risk was not driving the market.

In the five years leading up to 2022, central bank gold purchases averaged around 470 tons per year. In both 2022 and 2023, purchases were over 1,000 tons.

This time frame aligns with Goldco’s revenue climb.

Meanwhile, this year’s bank purchase numbers aren’t finalized, but the World Gold Council said the first three quarters of 2024 have behaved similarly to those of 2022.

While the impacts of inflation, interest rates and the U.S. dollar can be more precisely telling on the price of gold, geopolitical tensions can be more difficult to quantify as different events vary in impact.

“Every geopolitical risk event is different,” Steel said. “Ukraine is different from Gaza is different from Lebanon is different from U.S.-Sino rivalry in the Taiwan Straits is different from tensions in the South China Sea, and so it’s very hard to bottle the geopolitical impact of gold. We know it’s bullish, but it’s very difficult to say how bullish.”

Evaluating gold as an investment

With gold’s reputation of volatility, it doesn’t necessarily pass Haworth’s screening process. 

One way he evaluates an investment is whether a client will receive “positive and persistent excess return.”

When it comes to gold, that’s not always clear, “because that implies that there’s a fundamental driver for gold,” Haworth said.

Without being able to pinpoint a reason for a guarantee on return of investment, it’s difficult to justify gold’s inherent volatility.

“Now when markets are rising, people often don’t pay as much attention to volatility,” Haworth said. “We certainly do, and we’ve seen significant swings in gold.”

Ignoring gold’s volatility boils down to the fear of missing out.

“All (gold) does is sit there and you hope someone else desires your stack for more than you paid for it and that those dollars are not worth less,” Haworth said. “That’s the challenge in an inflating economy. One dollar is worth slightly less tomorrow than today because we always have inflation.”

As industrial demand has increased in recent decades for other precious metals, gold has behaved differently.

“If you look at the price patterns for platinum versus gold, they’re not really in the same ZIP code in terms of trading patterns here lately,” Haworth said. “That speaks to rising industrial demand for platinum, particularly in vehicles and it’s the same thing for palladium.”

On the other hand, when gold makes a move, Steel said to expect a derivative move for silver.

“Silver is pretty much the handmaiden of gold,” Steel said. “… Silver chases gold but then tends to outperform it on the upside and the downside.”

As for what’s next for gold in 2025, Steel predicts the gold market will be “very, very volatile,” estimating a price range of between $2,350 and $2,950, a wider range than is typical.

A forecasted stronger U.S. dollar and lower interest rates could bring the price down, but mounting public, government debt not only from the U.S. but also in Europe and Japan could bring it up, Steel said.

The Wharton School of Business at the University of Pennsylvania estimated Trump’s proposed tax and spending policies would increase debt by $5.8 trillion over the next 10 years on a conventional basis.

A-Mark’s chief executive echoed Steel’s debt sentiment.

“We’re in the hard asset business and continued and unsustainable deficits and borrowing of money is likely to be good for our business,” Roberts said.